bubbling up last several months. and one report that i'm looking at from trimtabs.com saying -- charld biderman thinks the sell-off continues in china for a couple reasons. chi china's security ipo approving four ipos per week rather than one. more supply. number two stock buybacks in hong kong and taiwan lowest since 2009.. >> and some suspicion over the fact the chinese authorities keep vacillating over whether or not they want to ininterfere in the markets. but we're finally getting a bit of a test and it's about time here. there are people who believe, and they're the majority, there's a floor under the markets. is this really true? the oldest technical analysis service coming out and saying the current signs of weak's in are short-term, there's no long-term. and any pullback are basically opportunities for new buying. that's largely bullish commentary from lowry's. meantime the weakness in the cyclical group but we saw the strength in the dollar you heard maria talking about weakness in china all the big names alcoa

dupont, caterpillar leading the charge to the down side but again only 4% 5% decline here retailers disappointed. guidance for the third quarter disappointing.g. the question is is it an anomaly or is home depot and target going to follow? their numbers will be out tomorrow morning. that will really set the tone for the trading tomorrow. elsewhere we got master trust data out for some of the big banks. this is basically a look at credit card delinquencies. the general trend here is it's improving. jpmorgan chase, american express, all generally had positive trends here. those stocks are down along with the rest of the market here today. one group that is doing decidedly better here today in general are the hmo stocks. that's because the president signaled over the weekend there may be less of a public component to the health care reform issue. that's about the only sector that's to the up side here today. let's talk about what's going on in the rest of the markets. go to all of my friends around the board here. matt nesto standing by over at the nasdaq. >> thanks, bob. appreciate it very much. you know, where is that lift?

we'll see. we've got 60 mirnz to nutes to . but we're still down 2 1/2% at the nasdaq, our biggest single-day decline we've seen since july 2nd. if it goes to minus 2.7 it takes us back to late june-b a two-month decline we haven't seen in two months.s. take a look at erts, electronic arts, down 7 1/2% here today, the worst performer in the e nasdaq 100. interestingly, it as well as wynn and liberty media all have been very hot and boy, are they cooling off in a fast way, discretionary stocks. express scripts, on a defensive day, it is one of the few gainers here today. also noticeable is microsoft. nobody's happy about a 1.7% giveback, but relative outperformance is real on wall street and it's what it is. it's not falling as much, nor is intel. ceflon, another drugmaker, strong here today. biotech stock up .7%. dell looking to get into the crowded handspace market via a

deal with china mobile. with their new mini i-3 coming out later. interdigital down over 20% here today. a judge at the international federal trade commission ruled that nokia did not violate their patents. let's get down to brian schactman at the nymex. >> thank you, matty.. you talk about relativity.. i want to start with a broader picture. you look at reuters' crb index you'll see basically that's been down about 4% over a two-day span. it's been a giveback pretty much across the board. we focus so much on oil, and i do want to talk about oil because it's a dynamic day. we have obviously a stronger dollar, weaker equities part of the picture. some of the weakness perceived in china was one thing, but there was short covering late in the day, and we'll see if that spills over into tomorrow. we didn't breach some lows in the equity market, and there was some support, and we had a bounce late. i also want to point out the rest of the complex was down. rbob actually went positive and nat gas getting hammered. eight down days in a row getting

hit hard. quick look at gold like many of these things off the lows of the session but still down.n. that's more of a strictly correlated dollar play but the rest of it i want to talk about copper very briefly. news out of chile that exports down 47% year over year from january to july and also it was limit down trading in china overnight and finally silver coming down hard off of some two-month highs. let's go to rick in chicago. >> schac, the credit update is pretty logical. we're seeing some flattening here, but let's be certain, all rates are moving down. it's just that short rates are moving down a little bit more aggressively -- excuse me, a little less aggressively than long rates, and that makes some sense. remember, the winner today actually was the five-year. five-years pretty much miss popularity on the yield curve these days with investors worldwide. we learned with tick data that the chinese maybe didn't buy as many treasuries but the japanese stepped up. but all in all they're still good sponsorship. that date is always two months

in arrears. now let's look at what may be the most important area. let's look at the fixed income side and consider the dollar and treasuries are finding most of their buying because of the weakness in equities. the dollar gave you a very early signal last week as it started to strengthen that equities might be the field that would be the summer blahs. and the last point we want to make toyed is if you're looking at treasuries you want to look at the currency and the currency that stands out today is the yen because whether it's the peso, the canadian, the aussie, the pound, the euro, all of them are doing substantially worse against the dollar. the yen always seems to do better when equities are at their worst. now let's go back to bob and maria. >> rick, thanks very much. and joining us now to talk more about the markets, how to invest in this environment, what's ahead second half of the year, sam stofshal chief investment strategist for standard & poor's. along with him daniel fishberg, chief investment strategist with laffer frishberg. thanks for joining us once again. let's talk about where the rally

stands. what do you do with your money at this juncture? what do you think? >> well, i'm holding on and i'm not getting worried by this little bit of a sell-off. we've been debating back and forth because there is a little bit of a pullback going on but i think i've got more of a chance of missing the timing than i do if i just think about from now to january and buy on weakness. >> sam, why did it all begin in asia? china has been such a focal part of really the global growth story as far as the economy is concerned. is that expectation now-s that changing about china sort of, you know, lifting the world out of the recession?n? >> i don't think so. i think the economic growth projections are still fairly strong for china in 2010, likely to see a gain of more than 8% next year versus the 7% and change for this year. i think that the market itself probably got a bit ahead itself. we saw some profit taking and it ended up being a little bit of a financial tsunami around the globe, but i think really it is offering more of a longer-term

buying opportunity, maybe bringing the s&p down to about 950 before it turnsz turns around. >> 950 and right now we're at 982. >> is there a floor under the market right now? there's a sense from the bulls that suppose we drop to 900 on the s&p there will be buying activity, rather than an opportunity to sell-off people will try to get in at a price lower than where they were now. >> you know, i hope those technical levels don't hold because what's going to be driving the market up later on is going to be changes in actual economic performance rather than technical levels. so the more it overshoots to the down side the better the opportunity. >> but i'm not talking about technicals. a lot of traders feel they've missed the move up here in the summer. >> yes. >> now is their opportunity if we do drop more here in august to get in at this point. do you buy into that idea? >> yes, i'm afraid you're right, that any little drop will bring in more buyers who missed it. yes. >> because there's that kind of optimism on the -- >> because everyone really knows that the economy is steadily

improving and will continue to do that for a while. >> and sam, are you very worried at this point? here's what worries me. a lot of the s&p 500 earnings on the third and fourth quarter, particularly fourth quarter-s predicated on financial earnings going to the up side. do you really see that happening at this point? >> it's not just the financials. it's also the consumer discretionary in some ways by taking gm out of the index in a sense you've artificially boosted the comparisons but also you're seeing an improvement in technology and other cyclical areas going out. i think also most people are looking at 2010. they've pretty much discounted '09, the p/es on '09 really don't look all that bad, but they start to feel warm and fuzzy when you look at 2010. >> let's talk about 2010, then. give us the scenario for fundamentals right here, sam. we're focused on earnings. we know earnings are down, and they'll probably continue to be down for a little while. when does that reverse? when do we start seeing revenue growth, real evidence of an economic recovery, which even with this bull market in the

stock market the last couple months we haven't seen? >> no. and actually, it's more that we've been seeing a slowing of the decline. traditionally the earnings trough about nine months after the market bottoms out because of the anticipation. so i think it's going to be a 2010 story. we probably will be spelling recovery without a v, certainly without an uppercase v. and basically we will start to see some revenues start into ch higher. >> well, also -- he's right about that, but also the china story you that talked about before, everybody knows it already. they will have 8% growth, but everybody knows it. the surprise is going to be the growth in the united states that no one is now expecting.g. it's not just -- >> but what about where it comes from? where are you seeing this growth? heading into the holiday season, back to school probably not -- >> low inventories, but also less fear. people who thought -- some people lost their jobs. the people who have them are pretty much feeling more stable. house prices are going to look

up in a few months. all this is going to be happening, and you're going to gradually feel better. >> but let's go back to the earnings. lowe's, the analysts have been raising estimates on the retailers for a couple months now. they're head of what some of the retailers are reporting now. lowe's basically lowered the bar. analysts are going to be under some pressure to lower their estimates for 2009 into 12010. isn't that a concern? >> certainly not from my perspective.e. marie driscoll in our retail group have been focusing on lower earnings for the retail side, bad back to school, bad holiday saepdss. they've been saying the companies have been doing a good job managing inventory levels, managing controls, and therefore keeping stable. the top line is the problem.. >> we will leave it there, gentlemen, good to have you on the program we so appreciate it thanks very much.. later on on the show, bob, we're going to be talking about google, the ipo up 500% since the ipo. five years this week since the company went public. we're going to talk about google

second half of "closing bell." meanwhile we've got about 45 minutes before the closing bell sounds for a monday, and the dow jones industrial average right now down 168. >> in late february our next guest correctly predicted a sharp market rally. now he's turning bearish. find out why and what he says you should be doing with your investments right now. >> after the bell housing, manufacturing, yes they've been showing signs of stability but consumer spending still pretty weak as we approach two different parts of the year for this sector, back to school and the holidays. will that be a major roadblock for recovery? we've got some answers at 4:00 p.m. >> and here are the most actively traded stocks 1/4 it's a law, citigroup and bank of america.

the highest level since november 2007 because of big jumps in new orders and shipments. and japan's economy has pulled out of its recession. japan's gdp growing at a 3.7%

annual rate in the second quarter, helped by strong demand for cars and electronics. the news comes a week after france and germany also returned to growth, although japan's growth a little bit below expectations. and according to published reports, china's sovereign wealth fund is going to make a big bet on the u.s. housing market. china investment corp. is reportedly in talks with managers in the public-private investment plan to buy up to $2 billion in mortgage securities because china believes the housing market is ripe for a recovery later this year. maria? >> well, bob, here's a big one for you. our next guest turned bullish in late february, when he said cover your shorts and predicted that the sharp rally would take hold. and that's exactly what we've seen. per permabear robert prefter is now bearish once again. founder and ceo of elliott wade international. he joins me now to explain what's behind this bearish stance. good to have you with us, sir. thanks so much for joining us. >> oh, thanks for having me. i can remember the days when i was a permabull.l. >> oh, you can? so what was it?

i want to ask you about turning bullish back when, and you're still right about that. but what is it right now that you see that's causing you to turn so err baaish once again? >> i've been pretty quiet for the last five months, or sitting on the declines watching the rally. it's been a beautiful run. 350 s&p points in five months. that's a 50% jump. at this point we're seeing the opposite of the kind of readings we saw at the low. at the low we had only 3% of traders bullish. that was one of the lowest readings ever. in early august we got two back-to-back days of 88% bulls.. so that's one thing to look at. we've also got what might be a completed elliott wave pattern. back in early march our up side target was 1,000 to 1,100 on the s&p we got pretty well into the lower end of that range. that's enough for me. i don't think anybody who comes in this late is going to get 50% out of the market on the up side. we've also had declining volume throughout the rally. so a lot of things came together in the first week of august to get me to put out an issue a

week and a half early and say that's enough for us. >> interesting.g. so in addition to the volume and certainly the valuation which h you note, what about the fundamental backdrop? a lot of people questioned the rally as it was moving higher r because the economic landscape hadn't changed all that much. what did you see in terms of the landscape which of course supports the market? >> well, usually the economic numbers provide a very good cover for the market when it's ready to turn. i'm sure you remember in late february, early march the big story was the biggest contraction since the great depression. everybody's got to be afraid. and they were. and now that we've rallied for five months, the economists are pretty much unanimous in saying that the recession is over or nearly so. i think this is a depression, not a recession, with bear market rallies along the way. and each one of these rallies is going to lead to an improvement in the economy. we're finally seeing those results. the results of five months of increasing optimism showing up in the economy. to us this is a very normal progression, but i think to

other people they use those things to make their decisions and in the stock market they generally tend it lag. >> you also have a great prediction on the dollar which we want to get to in a moment, but before i move over there let me ask you about equities in terms of practical results here. so if we were to see the sell-off accentuate going forward into year end, what do i want to do in terms of my own portfolio? how do i need to position myself here? do i go 100% short? do i keep cash on the sidelines? have some exposure to equities, international markets. or what? what's your preferred allocated portfolio here? >> well, when i wrote "conquer the crash" i said the average investor should be in the safest cash equivalent and stay there for the whole bear market. if you're a trader we've offered some opportunities to be short and then cover. and what i told people after the close of the 5th of august was, look, if you really are a trader and you've got money that you can afford to risk, you can probably go about 50% back on the short side. remember, we only came to the lower end of this up side target

that we had that could well be enough for a 38% retracement is one of the percentages we watch, if the market does decide to put a second leg on later this year, we'll probably use that to get even more aggressive. but most people i would say really shouldn't play in that kind of manner because markets can be very devastating to people who take a speculative or a leveraged position and many people are too cavalier in telling people to do that sort of thing.g. so safety is my main word. >> on to currencies, mr. protecter, one of your major predictions here is that the dollar is forming a major bottom and perhaps beginning a multiyear advance. can you tell us a little about that? >> well, i brought a chart. and if we've got all the pieces on it i'd like -- >> i think we have your chart. let's show robert's chart here. go ahead. >> because to me this is the single most interesting chart on the board. people don't pay enough attention to it. one of the things i mentioned in "conquer the crash" was that as we get into this deflationary

period you're going to see more and more markets trending together. we call it the all the same markets phenomenon. and it's been happening more and more. other people have called it no place to hide. but in any case, what you've got is every market pretty much moving together, real estate, stocks, commodities, all moving up and down roughly together, but they're contrary to this graph. this is a chart of the u.s.-dollar index. it's against the euro and some other currencies as well. take a look at the left-hand arrow we have over at bottom left. that's pointing to the march low on the dollar, and if you recall, i'm sure you do, that's when the precious metals made their high ticks. gold was over 1,000, silver was $21. then when the dollar tested its low in july of 2008, that's when oil topped out at 147.50. then we had the trepds move up in the dollar and this was a reflection of the credit crisis. this is when all the other markets were falling very hard and the only one going up was the dollar because as debt was

being retired and contracting in value the remaining dollars were gaining. now take a look at that arrow at the high. that was almost to the day a week after you and i were talking when the stock market bottomed and the dollar topped because that's when liquidity began to return along with optimism for the last five months. well, here we were on the 5th of august, this is one of the reasons i published early, we had only 3% bulls on the dollar, it looked like we were topping out in the stock market, and if these markets continue to be contracyclical as i think they will be you'll see a rising dollar foy away period of time along with falling markets. if you notice the 3% bull we had on the 5th of august that was the same reading we had on march the 6th and march the 9th and the stock market and went and bochlt e bottomed out. >> i want to get out of my commodity plays, then. >> i think so. oil bottomed at 33 bucks, got up to 73, and just a couple weeks ago was 72, hanging just above

70 as the dollar was making its low. so i think that market's probably reversed and so are most other commodities. >> great to have you on the program we so appreciate your precious time today. thank you. >> glad you're back. >> we'll see you soon. robert prechter, founder, elliott wave international. it's a downer of a day, nearing the worst level of the day. > we're going nowhere here. >> 170 on the dlan we will as we approach the final stretch. >> and up next get another take on today's sell-off. should you be taking money off the table or is the pullback creating new buying opportunities? we're coming right back. these days, wouldn't it be great

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welcome back.. pretty big sell-off on wall street today. here are the widely held stocks and how they are trading. it's virtually reflective of the broader market. and the banks are certainly leading things lower. with the likes of citi, b of a, jpmorgan, wells, goldman down between 3% and 5%. take another look at the markets now as we continue our coverage with the dow down 183, with eric marinack, chief investment officer at victory capital along with charles ortel, managing director at newport value partners. gentlemen, it's good to have you on the program. >> thanks for having me on. >> talk about what this sell-off today means if anything.g. is it just a reflection of the market getting too high too fast

or is this something that is more indicative of what's to come second half of the year? what do you think? eric? >> well, maria, i think this is just a little bit of a pullback. we've had a very powerful surge since the march lows. and we just concluded earnings season in which we had two times the average earnings surprise we've seen in quite a long time. so i think it's reasonable to see a little bit of a pullback, but i wouldn't read too much into it. >> does it continue, though?? do you think this is going to be steep and accelerate into your end? >> i doubt that's the case only because there are too many improvements at the margin, whether it's earnings, whether it's economic indicators, whether it's just the breadth of the number of stocks going up versus going down over the last four weeks. of course if this continues for a week or two then you have to reassess your impression of what's going on right now. but i don't think that's the case. >> charles, you're a value guy.

where's the value in this market right here? >> well, unfortunately, maria, and thanks for having me on, i think the value's going to be in being short. we are at work at looking hard at macro and micro data. it says there are continuing large structural problems. we have too much debt. there is not enough intrinsic demand and when we parse through the numbers that come out in the earnings season we focus more on cash flows and free cash flows and they are very discouraging. >> so talk to me a little about that, the cash flows and free cash flows. what's so disturbing? >> well, what you hate to see, maria-s a situation where you have down revenues and cash flow shrinking even more than revenues. a key to any type of robust valuation is the sense you can have continuing recurring intrinsic growth. and when you're not seeing that in revenues, then really what leads to earnings changes and cash flow changes is far less important. secondly, on accounting rules a

lot of costs end up flowing through what's called other comprehensive income and you don't really see them in earnings per share numbers. so as i say when we go company by company through some of the very large bellwether companies, companies that should be doing well in tough times, we see very discouraging results. >> unfortunately, sometimes the fundamentals really don't stack with the market moves because you know, you could have said that a month ago and the market still rallied, right? >> well, again, as are many others, we're more long-term investors. we've been in a bearish posture for quite a while. and we see individual standout opportunities to make money on the short side and very few good long opportunities at the moment. >> eric, i want to get your take on why it all started in asia. of course we know that there was a fixed -- better than 6% sell-off in china and that sort of spread around the world. i've got a report here from trimtabs.com and they're talking about chinese equities plunging

nearly 12% just in the past two weeks and they expect it to continue for a number of reasons. because the chinese securities regulator is expediting ipo approvals, meaning there's going to be a lot more supply on the market, stock buybacks in hong kong and taiwan are at the lowest levels in '09. retail account openings in china down in the first weeks. also the cash balance in chien aa down $85 billion since august 6th. and foreigners and domestic fund holders sold equities in india in the past week. what do you make of the chinese story here? >> what i would read into that is china's been the leading indicator of all the economies throughout the world in that they've put their money to work a lot more aggressively than we have where there's a lot of bipartisan debate as to how quickly orr where the money should go. they put it to work and restocked commodities across the boor and that on a week over week basis has been slowing down and if you look at the baltic

dry index it's actually down 26% from the june highs and put the june together, slower baltic dry index that's come down, and people sense that perhaps they're taking a step back and the economy that's been surging throughout the world. people are a little bit nervous, and it's hard to argue points made earlier. but i think the best way to go about investing right now is to buy high-quality growth stocks that aren't dependent on the capital markets, that are doing well despite the structural problems that still exist. >> you mention a good point in terms of the baltic dry index.x. maybe you can pull up the baltic dry index so we can actually look at that chart here because this is an important indicator to look at given the fact that it's basically telling you what's being shipped, giving you a real window into fundamental demand around the world. and we are looking at a real decline just over the last month or so. so what countries around the world may be resilient in the

face of this weakness in your view, if any? eric? anybody? >> i think you have to do it company by company because i do think we've been in a globally synchronized recession over the last 12 months and we're getting out of it. we've had the greatest easing in synchronized global cutting interest rates, so that's helping. but i would still look for the companies. and to the points made earlier, you want companies as much as possible to beat both on the revenue front as well as the earns front. and in this past quarter what we saw is that only 43 companies of the s&p 500 beat on both levels. and those companies were rewarded the best. much more so than the ones that beat on the earnings front because a lot of that was done through cost cutting. >> it's a really important point. charles, real quick here. final question. how much cash are you sitting on now, and what is it going to take for you to get that money back into stocks? >> well, maria, we provide just

investment research. and our investment model portfolios are 65% short. so we see a lot of short opportunities on the long side, we like precious metals, notwithstanding what was just said. and the balance is liquid. >> all right. that's what makes a market. you're shorting the dollar. he thinks the dollar's about to rally from here. gentlemen, good to have you on the program. thank you. >> thank you.. >> we'll see you real soon. 25 minutes before the close'll bell sundays on wall street. dow industrials down 170, bob.b. >> we're going nowhere for the last three hours, folks. volatility index soaring to its highest level in a month, but are the options markets betting the vix can keep up today's rally? answers in just a moment. i'm r tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 i want everything right where i can find it. tdd#: 1-800-345-2550 anything that makes trading easier. tdd#: 1-800-345-2550 i want to be right in the middle of the action-- tdd#: 1-800-345-2550 you know-- i have to see what's going on. tdd#: 1-800-345-2550 and when i pull the trigger... tdd#: 1-800-345-2550 ...i've got to get the best price out there. tdd#: 1-800-345-2550 (announcer) try the new schwab.com tdd#: 1-800-345-2550 for yourself. tdd#: 1-800-345-2550 call 1-888-4schwab

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welcome back. 30 minutes left to go until the closing bell. here's how the markets are shaping up. we are just off the lows for the day. 200 down was where the dow was earlier in the day. cyclicals are the weak point here. but we're also getting weakness right across the board. the one exception is some of the health care stocks where hmos are doing a little better on some speculation that perhaps

there will not be as much of a public component in the health care reform bill. the s&p 500 also on the weak side here but the nasdaq trailing the major indices. techs haven't been doing much of anything and you see that's a real flat line there for thoed indices. maria? >> time for the "fast money" final call. this may not be such a bad thing at least according to our next guest. joining me with more, jon najarian, optionmonster.com co-founder, "fast money" contributor. tell us why it's so important. >> it's always viewed as the fear index by a lot of people, maria, but for me what it is is it's also a way to hedge and in fact if you had a million-dollar portfolio, which quite frankly a lot of individuals still do, you can hedge that exposure with the vix options pretty effective ly and for very good risk versus reward. i think a lot of people did that and that's why we're seeing the reaction in the marketplace we are. we don't see a pop more than

just that initial surge this morning. in fact, the vix has drifted lower after the opening this morning. and the futures of the vix, which go out to september and october, those futures are likewise not moving up as fast as the spot. all that's telling me people were anticipating this move today. >> very interesting. and i know also we want to hit on home depot and target. they're reporting earnings both slightly negative. tell aus what you're seeing in terms of target, home depot, and also want to get your take on options in the health care area because health care is the one area that's actually higher today in the face of this weakness. >> absolutely right. well, i think we've all been talking all day about whether or not the market's got anne head of itself. i think clearly one area that has as indicated by that pretty sharp sell-off in lowe's are the retailers. and when you look at stocks like home depot that put in a 52-week high on just friday, and a lot of others like bed, bath & beyond and so forth, you see people that are really betting

the consumer is back in a big way. and i'm not saying that the consumer is not coming back, but i think these stocks are ahead of themselves. so as far as for target and home depot i think they're two great companies. i would be like dan frishberg, a buyer on dips here, but i think both of them are due for a pretty significant dip with these earnings due tomorrow morning. >> sow want to be selling into any strength and try to debt these stocks at better levels. jon, great to talk with you. we'll see you tonight on "fast money." thank you very much. >> thank you, maria. >> coming up on "fast money" after today's sell-off the "fast money" traders will give you the stocks on their correction shopping list. plus peter shipp makes his case for why today's down move is only the beginning. melissa and the gang live 5:00 p.m. eastern. 20 minutes before the close.e. we've got a market under selling pressure with the dow industrials down 177. feels like things are worsening slowly but surely, bob. >> and the key thing about lowe's he was just talking about is analysts have been raising estimates on lowe's going into this report. now there's going to be some pressure on them to perhaps correct that or be a little more

conservative in their investments. certainly for 2009 and 10. home builder sentiment rising to its highest level in more than a year, so is this fresh hope that housing starting to turn around? >> and then after the bell, health care, one of the few positive areas today in this market. largely because the white house is hinting it may back off of the public health care option. is health care a place you want to be investing right now in this environment? we're going to check it out. 4:00 p.m. eastern. join us.

welcome back. the nation's home builders continuing to gain confidence. cnbc's diana olick in washington now with that angle. diana? >> that's right, maria, the national association of home billioners monthly sentiment survey rose a cautious one point to 18 in august. remember of course that the line between positive and negative sentiment is 50, so we've still got a ways to go, but at least it's going in the right direction. now, the survey covers three areas -- current sales, buyer traffic, and sales expectations over the next six months. current sales went unchanged. buyer traffic rose three points. but sales expectations took the biggest jump, up four points.

>> we really need to think about where it is on an absolute level. you know, by any measure it's still pretty dismal. it's coming off of its lows. but i think as we've seen the pace of housing sales are also coming off their lows. i don't think the kind of gradual easing up from the bottom is what is embedded in the stock. >> now, granted, most stocks are taking a hit today. so you don't see any real reaction from the confidence number. but overall the stocks of the big home builders are way up over the past two months. so the question is is it time to get in now or is the time already over? >> everyone thinks we're still a few years away from decent earnings and we're already trading at a multiple that suggests we're at healthy earnings. so i think the group's gotten a little ahead of itself in terms of valuation. >> and he says he'd like to see something more than just a one-point jump up in the confidence level to get back into those stocks. now, of course tomorrow we get housing starts and the street is expecting a 2% jump up. we'll see what happens at 8:30

tomorrow morning. for more go to the block, realtycheck.cnbc.com. let's get a take on how the home builder sentiment fits into the greater outlook for the housing market. with us stan misucci ceo and president of macro markets. eric landry the housing analyst over at morningstar. gentlemen, thanks for joining us.. stan-u debuted a way to bet on home price trends a little more than a month ago. this is the up and down indices. the macro market indices. give us 20 seconds on what's involved here because this is a fascinating direct play on the housing market. >> that's right. it's the only direct play on the housing market. we launched major metro housing up, symbol umm and major metro house down, symbol dmm, on june 30. the securities are trading every day, and they offer either a long or inverse position on the change in the s&p, case shiller composite index. >> they're completely mirror images of each other. in a way they should be. with the up index you can bet that home prices might be going

up in the market in the next few years. with the down index you can be betting that it's going down. and it's a pure play on prices itself, home prices. it's not buying home builders, right? >> that's right. all we hold is short-term treasuries and cash. and the treasuries and cash are moved between the up and down securities based on changes in the case shiller top ten index. it is a pure play on home prices. >> eric, you published a report a couple months ago at morningstar talking about the case shiller price indexes, noting that you believe we should be seeing sequential improvement in prices later in the year. is that actually happening right now? >> yeah. it actually happened for the first time in almost three years last month, and there's probably some pretty good odds it's going to happen for the next two as well. the thing about predictions, it's easy to predict the past, a little more difficult about the future.. and with case shiller we're already talking about old news. it's got a two-month publishing lag and it's a three-month moving average. the data that's published every

month has data that's old as five months in it. so it's pretty old use. >> how do you do that? you're sort of gaming it a little bit. how do you forecast case shiller without actually having the data in. >> it's based upon median prices. and if you keep track of median prices in real time, it's actually pretty easy. the correlations are pretty high. the data's pretty meaningful. >> sam, given what he just said, can't we get that a little quicker? >> we can.. we can look at the current trade marketplace of umm and dmm, which is a forward-looking indicatesor of where people think home prices will be five years from now. >> you know what i like about this, people ask me all the time what's the difference between investing in gold versus gold companies or home builders versus housing? here you're getting an absolute pure play. when you invest in home builders, you're betting on how well the home builder's doing, what the balance sheet of the home builder looks like. it can be a little divorced from home prices.. this is just a pure play. i want to point out to people that this is for 2014. you're giving people a closing price of where you think home

prices are going to be at 2014 in this ten-nation index, and again, you see that move. here's the question. is it going to be like this on a daily basis? will they always be mirror images on a daily basis of each other?r? can it be some spread between them? >> there really shouldn't be. the securities are designed to trade as mirror images to the extent they moved away from that, the professionals would through creations and redempt n redemptions bring them back into loin. but what we've seen with this structure and this is not our first at macro share is they do stair within that parity of images and as you say it's a pure play on home prices.s. >> eric, last question here. based on your analysis, where do you think home prices are going to be in the next several months? are we going to continue to see sequential i am prochlt or is this going to stall out? >> what you're going to see in the case shiller is two to three more months of sequential i am improvement.t. and the improvements according to our data are going to be a little stronger in the next two. having said, that bob, if we look at the realtime data there is some seasonal weakness

starting to set in right now which will manifest itself in case shiller sometime around november publish dates. >> going to have to leave it there. sam, eric, thanks very much. if you want more information on this macroshares.com, we'll explain how these indices work. we sort half-to move through this very quickly. but macroshares.com. fascinating way to play the market. >> i've got to tell you bob, there's a ral date about that because a lot of people i've spoken to think home prices are not done declining and we are going to see further deterioration in housing prices. the debate rages on about whether or not we've actually turned the corner on housing when it comes to pricing.g. >> sounds like you're investing in the down part of that index. >> i'm not investing at all.. i'm looking at the market. >> ten minutes to go before the closing bell. dow jones industrial average not far from the lows today. 14 points from the lows. nasdaq underperforming. >> we're going under the radar next. the under the radar stocks. we'll take a look at one and find out this one small biopharmaceutical company is surging, up 5%. stay with us.

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home depot earnings out tomorrow. pfizer and most of the drug stocks doing a little bit

better. techs, as you see, are definitely ladefinite ly lagging. >> let's take a look at some of the under the radar companies. their experimental drugs that treats a rare genetic disorder received temporary approval from the food and drug administration. shares up 12%. interdigital plunging after a u.s. international trade commission judge giving an initial ruling that nokia did not violate four of the company's patents. inter digital said it will ask the full commission to review this decision. looking for a reversal. down 23% nonetheless. illinois toolworks reporting a 23% decline in second quarter operating revenue due to unfavorable exchange rates. the company also reiterated its third quarter earnings will be in line with street expectations. take a short break. then we've got the closing countdown right after this short break. >> and after the bell we'll tell you which stock is up more than 400% from its ipo price five years ago.

>> can you guess? it went public in '85. that's the only clue i'm going to give.

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bob pisani down on the floor of the new york stock exchange. why am i walking backwards? let's walk forwards.. always go forwards, folks. the dow and s&p is having the worst two-day rally -- or two-day decline in the last couple of months here. this is finally happening, and it's a good thing. it's a healthy thing for the market. remember the big debate pb the bulls are arguing that even if the market dropped a big bit, pick a number, 900 on the s&p, whatever your number is, that there is an underflying floor to the market and by that the bulls are arguing that there is a point at which bulls will come in and buy aggressively. that's a floor und err why the market. so 666, that was the march 5th low. that's gone. that's in the history books. this is the bulls' argument. we're not going to have to worry about hitting those lows again because buyers who missed the rally and there are significant numbers who did, particularly this summer rally since july, are eager to pick up stocks at some lower level, say, 6%, 7%, 8%, nobody knows the exact number. there's the theory and there's a good day to test it on a day like today. early on the argument was it was

unlikely to happen. when the market opens down 200 points it's hard tofor people t come in who are shorting. we've had declines throughout the day in all of the major sectors, but in particular the cyclical groups have looked notably weak as the dollar has been quite strong. we've also seen financial stocks a little bit weaker here. ending right near the lows of the day. the good news on the financials is we did get some of the master trust data in for the month of july for some of the big banks, and this data looks at delinquency rates on credit cards. generally the trends are continuing to improve. we got numbers from jpmorgan, for example, decent numbers from american express. that's good news. on a day like today that's not going to matter. the overall market weakness is going to undercut virtually everything. hmos generally very good news because of the sense there's going to be much less public end of this whole reform in health care. so the hmos have been doing well throughout the day.

lowry's had an interesting note talking about generally short-term weakness in the market was largely buying opportunities and have been reflected in that recently. there's the closing bell. you know who's next. maria bartiromo. and it is 4:00 on wall street. do you know where your money is? hi, everybody, welcome back to "the closing bell." i'm maria bartiromo on the floor of the new york stock exchange. here's what we're covering at the close tonight. the biggest sell-off in stocks in about six weeks. stocks selling off after a big decline in china amid renewed concerns about consumer spending.. china down almost 6%. europe down about 1%. that had investors seeking the safety of treasuries today, sending prices higher, yields sharply lower. the volatility index today surged as much as 17%. highest level in a month.. we've got a lot to cover on "the

closing bell" tonight. take a look at how the market averages finished today's trading session. the dow jones industrial average down about 2%. 184 points lower at 9,136. nasdaq composite down nearly 3%. technology one of the real leadership groups on the down side. down 54 points on nasdaq. s&p 500 down 24 points at 979. worst day for the market since early july. asian markets look like this.. this is really where it all began as china has been the jewel in terms of the growth story globally. new worries about that growth stalling have the nikkei, the south korean index, shanghai, taiwan, and hang seng all down between 4% and 6%. it spread to europe as well. major averages throughout europe down about 1% on average. look at all the action on wall street right now from bob pisani, our eye on the floor of the nyse. >> the bad news today over in japan where it didn't jump as much as they wanted, gdp. this decline is pretty modest. the only bad news is we really didn't get much of a